June 29, 2012

We
added Morgan Stanley at $14.45 (sold at $20 in February), Dell at $12.30 (sold
at $17 in February), Symantec at $14.40 (sold at $16.32 in February), The
Hartford at $17.60 (sold at $20.50 in February), and the IGN (Networking ETF)
to accounts this week increasing our invested funds to about 40%. Today marks
quarter end for large institutions and mutual funds. Last year it also marked
the end of the major averages and indexes holding serve leading to down markets
July through October. The markets have held better than we expected while sentiment
has continued to deteriorate. Since we react to events rather than our
predictions we have added equity exposure as sentiment has turned more bearish.
We went to all cash when sentiment was bullish and the issues we are buying
have all corrected much more than the overall indexes and averages. But, with
second quarter earnings’ reports arriving in the next few weeks, caution
remains a watchword and thus our large cash positions in all but the smallest
accounts.*****

In case you missed this item:

Everyone in California has
lost their damn minds in advance of the state's foie gras ban
that goes into effect this Sunday, July 1st.

Californians have known this
was coming for 8 years (the ban was signed into law by Governor Schwarzenegger
in 2004) but, with a child's concept of time, have spent the intervening months
convinced always that the dark day of the foie gras ban was still very, very,
very far away. Now that the final hours are upon them, many of the state's more
insufferable citizens are downing foie gras like it's the only food their
bodies can process…Foie gras is produced by force-feeding
ducks and geese corn through a rubber tube in order to enlarge their livers, a
process that sounds much more majestic when you describe it using the French
term gavage.

June 22, 2012

We continue to expect a move
down to S&P 1200 but bought some quality shares to raise exposure to 20%
equities. We added shares in companies we have owned/traded over the years that
are at especially attractive prices and that have corrected much more than the
market has in the last three months.

Nvdia is
down 23% from its yearly high. NVDA will provide the ARM chip for one of the
two of Microsoft’s new tablets (Surface). We have traded from this level
successfully over the last few years.

We traded Sony
for a plus gain. The shares are cheap but we sold because we added more
attractive positions as prices moved lower.

GM A warrants
offer the right to buy GM shares at $10 through 7/10/2016. It leverages an
ownership position in GM. GM is cheap. The warrants are down 36% from their
yearly high.

Juniper
is down 32% from its yearly high. We traded it a couple of times last year and
own for a trade.

Walgreen
dropped to an irresistible price. WAG raised their dividend so the yield is now
3.7%. Owning Walgreen is like owning a savings bond with appreciation potential
of 100%.

Abercrombie
& Fitch missed its numbers 2 quarters in a row and has dropped from $78
last November to $31. We have owned profitably over the years. It is the
cheapest, quality retailer in the current market.
*****

Markets turned south on Thursday
as Goldman Sachs recommended shorting the S&P 500. Goldman has so many
different folks recommending so many strategies that one of them has to be
correct.

(GS)
6/21/2012: We (Goldman) are recommending a short position in the S&P 500
index with a target of 1285 (roughly 5% below current levels) and a stop on a
close above 1390. This morning, the Philly Fed print of -16.6, down
sequentially and worse than expected, provides further evidence that weakness
has extended into June.

Although yesterday’s FOMC
delivered easing as expected, with a dovish statement, positive risk sentiment
ahead of the FOMC had already buoyed markets. And we now think, with
incremental US monetary policy on hold, the market will need to confront a
deteriorating growth picture near term.

The risk to our recommendation
is that the data soon reverts to the 2-percent growth path our economists
expect, that China growth turns, or that European policy-makers’ rhetoric buoys
risk sentiment further from here, with the upcoming end-of-June summit a focal
point on this count.

Abby Joseph Cohen
of Goldman Sachs in May when S&P 500 was 1403 (now 1320):

May 2, 2012 by The Guru Investor
Goldman Sachs Chief Equity Strategist Abby Joseph Cohen says she thinks the
U.S. won’t fall into another recession, and sees stocks as “very
attractively valued”. “All you need to believe is that we will
avoid another recession over the next couple of years,” she told CNBC. “And
that is indeed our forecast, even though we see growth has slowed somewhat.”
She added that interest rate levels make it ”hard for us to see how bonds
can generate the same kind of returns going forward that they have over the
last 30 years. Equities seem to be very attractively valued.” Cohen says that
growth has slowed recently, and that a mild winter may have “puffed up” growth
figures in the first quarter. But she thinks the long-term term trend of growth
is still to the upside.*****

Happily for drivers oil is now
under $80 per barrel. Goldman hasn’t been so good on Oil. From the Daily Telegraph
June:

GS in May 2011: "It
is important to emphasise that even as oil prices are pulling back from their
recent highs, we expect them to return to or surpass the recent highs by next
year," Goldman said. The comments from the investment bank, which warned
its clients to sell oil and other commodities last month, halted the five-day
slide in crude prices. Brent crude hit $105.15 at one stage on Friday but
rallied to $2.46 at $113.26 in afternoon trading, although still down almost
10pc this week. The bank said the recent fall was prompted by weak
macro-economic data and US inventory data – and did not rule out a further
limited short-term fall in oil prices if data continued to disappoint. "We
continue to believe that the oil supply-demand fundamentals will tighten
further over the course of this year, and likely reach critically tight levels
by early next year should Libyan oil supplies remain off the market,"
Goldman added.

June 19, 2012

Comment on Model Portfolio activity

We put some dollars to work buying Walgreen after it dropped
$2 per share to a new 12 month low on news that it was acquiring a 45% stake in
Alliance Boots with an option to buy the rest.. The markets didn’t like the
news but with interest rates at an all time low the move makes sense to us.

Walgreen
Co. will pay $6.7 billion in cash and stock to buy a stake in European health
and beauty retailer Alliance Boots, a deal that would give global clout to a
U.S. drugstore chain struggling with slipping sales in its home market. The
combination would create the largest single purchaser of prescription drugs in
the world and give Walgreen access to emerging markets like China and Egypt,
company officials said Tuesday in announcing the deal. However, it also will
plant the biggest U.S. drugstore chain in a continent beset by debt worries
from Greece, Spain and other nations. http://finance.yahoo.com/news/walgreen-spend-6-7b-alliance-102432035.html*****

We also added Sony which has been having problems but is at
an all-time low plus shares of Juniper which we have traded successfully the
past year and General Motors A warrants at $13, a $1.25 premium. The warrants
offer the right to buy shares at $10 through 7/10/2016. Finally, we added
Abercrombie & Fitch at $32 down from $75. We have wanted to place funds in
these issues for a while. The markets have bounce off their lows of a few weeks
ago and digested the Greek election news well. We have most of our funds (80%
and more) still available for deployment.*****

June 1, 2012

We
remain all cash in accounts. The May Employment report was a disappointment and
stocks continued their slide. With the S&P 500 closing below the 200 Day
Moving average the markets are set up for a possible interim trading bottom
next Tuesday if Monday is a large down day and the selloff continues into
Tuesday morning. If that occurs we may buy some shares for a trade. If the
markets rally Monday the eventual bottoming process will be delayed.*****

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